Timing is everything. You hear this expression often. But for restaurant bar managers, it is the simple truth. Running out of inventory kills sales. And it can damage your reputation. Overstocking inventory kills your cash flow. That can damage your ability to pay ongoing bills or invest in growth opportunities. The right small business loan can keep your inventory flowing smoothly. Even if you have bad credit.
IT’S A DELICATE BALANCE
Kevin Tam is an experienced bar manager. He writes, “A wise bar operator once told me, ‘any schmuck can put together a liquor order, but a smart bar manager knows the fine line of ordering enough so they never run out of anything, but never unnecessarily purchase too much inventory and have money tied up in stock that does not sell.’”
As bar or beverage manager, you are responsible for inventory ordering and management for that side of the business. You have to know and maintain the correct pars for all your inventory items:
- Spirits and associated cocktail ingredients
- Wines for glass pours
- Consumables from condiments to bar snacks and paper products that are charged off to your bar’s expense lines within the restaurant budget
If your bar is known for its interesting, trend-setting cocktails and house-made infusions, those unusual products can brand your bar and build customer loyalty. You can’t afford to run out. The right small business loan can keep stocked with specialty products. It can also help you:
- Routinely replenish well brands and fast-turning customer favorites
- Meet short-term needs for catering events and in-house parties
- Bring in seasonal products
Depending on the size of your bar and your type of clientele, you could be sitting on inventory worth $150,000 or more. Or your restaurant bar could be a cozy hideaway. Whatever the volume or value of your inventory, managing it cost-effectively requires planning and foresight. Just like the restaurant side of your business, it’s critical to have all the ingredients you need at hand. But you don’t want excess, because it’s money sitting on a shelf.
All your inventory has to be within easy reach. So, except for special events, you’re limited by the space on your back bar. Your restaurant may have some space in back to stack cases of products you literally pour through – tequila and triple sec for margaritas in your Mexican cantina, for instance. That said, much of your inventory is ordered one bottle at a time. Managing ordering schedules is critical to ensure you don’t run out. Manufacturers call it “just in time” inventory management.
Most restaurant bar managers order weekly. You have to be able to predict what you’ll need. If a distributor or distiller is doing a big marketing campaign, you need to be aware of that, because that should increase demand. You must also factor in delivery time. Your vendor’s ordering deadline might be Wednesday at 5pm. But that doesn’t mean you’ll receive your order Thursday morning. You have to budget according to delivery schedules. When timing presents a cash problem, restaurant business loans can bridge the gap.
YOU HAVE FINANCING OPTIONS
Your restaurant bar is not a good candidate for traditional inventory financing. That’s because some of your collateral moves quickly. If you default, there may not be much left for the lender to sell. Lenders aren’t in a position to easily liquidate liquor anyway. So your inventory isn’t really an “asset” in their eyes.
Here’s some good news: there is more than one “right” small business loan to help pay for inventory. Even with bad credit. For example:
- If the week’s order is light, you could borrow against your business line of credit.
- If you need to replenish bar supplies mid-week, you could use your restaurant’s business credit card. Your food and beverage manager can also work with suppliers to arrange payment terms. Spreading your cash outlay over 30, 60, or 90 days gives you more cash to work with right now.
- You always want to negotiate with vendors for bottle-on-a-case or other discounts. You get more inventory, without spending more. Or you can test-run a new product to see how your patrons like it.
A favorite small business loan for financing inventory is merchant cash advance. This is an especially good fit for any restaurant bar. That’s because you consistently do a lot of credit card business. With this type of business funding, you’re borrowing against future credit card revenue. The lender gives you cash you can use right now. Then they take an agreed-on percentage off the top of future sales until your loan is repaid. It’s fast and painless to get approved and move forward.
And there are two other important benefits to merchant cash advance. If you have bad credit, that doesn’t matter. The lender isn’t interested in your credit score. Instead, your history of electronic sales proves your ability to repay. Even better, repayment is affordable. It’s a fixed percentage, not a fixed dollar amount. So if sales are high, the percentage that goes to your lender is higher. But if sales are slow, the lender takes less.
What if you’re planning to open a brand new restaurant bar? You’ll need to purchase a full set-up of inventory. That requires a lot of cash, no matter what size your bar will be. You’ll want a different type of small business loan for that.
Managing your restaurant bar inventory doesn’t have to be overwhelming. You just need a well-organized system so nothing falls through the cracks. With an efficient inventory management system in place, you can protect your cash flow. You’ll always have the product you need, without over-spending. A good system can also help you:
- Detect and address shrinkage
- Accurately figure pour cost for each product
- Identify slow sellers that aren’t worth future investment
The net result is greater business profitability. Replenishing bar inventory is just one reason extra working capital can help grow restaurants and bars. The more you do to get your business ready for small business loans, the better your chances of landing the financing you want.